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could forecast that even that much money
wouldn't be enough.
BURN RATE 101
For professional military o cers, it cer-
tainly isn't easy to admit failure, or to
predict that you're going to be a failure
in 18 months or less. It took us the bet-
ter part of a year and about four more
meetings of the non-milestone DAB to
formally re-baseline the program---recal-
culate and revise the costs and schedule
for the remaining work---by deferring our
production and recoloring the near-term
money, etc. It was painful.
One of the main di culties was not only
projecting how much more money we
would need to nish development, but
how much more time as well. Red teams,
blue teams, tiger teams---the bureaucracy
assigned any number of "experts" to help
us gure it all out. e O ce of Cost
Assessment and Program Evaluation, back
then called the Cost Analysis Improve-
ment Group, was heavily involved in
getting to the root causes of our troubles
and identifying the resources needed to
proceed. We had been spending about
$10 million per month, and we were
going to need about $180 million more.
What no one seemed to be able to decide
was how much more time should be
added to the original 36-month schedule.
ere were 40-month estimates, and 42-
and 48- and nally 54-month versions of
the revised EMD phase. We nally arrived
at the 54-month estimate---18 additional
months for the additional $180 million.
How about that! We could've done some
pretty simple math to arrive at that sched-
ule gure once we got the latest revised
bottom-up engineering estimate. But
believe it or not, there weren't that many
people who even considered the burn rate
in their estimates of the schedule needed.
e idea of burn rate, or spending rate,
was an important takeaway for me from
all this. (See Figure 1.) EVM "gold cards,"
provided by Defense Acquisition Univer-
sity, and their published instructions tell
you all about various ways to gure out a
new estimate at completion (EAC). But
the EVM readings and formulas available
to all of us don't adequately teach us how
to estimate schedule when they take us
through these concepts of planned, actual
and earned value. e squiggly lines and
values typically guide us toward estima-
tion of a new budget at completion or
EAC, but they don't elaborate on how
much more time might be needed. And
time is indeed money.
It's possible, perhaps, to apply cost perfor-
mance index and schedule performance
index calculations against the original
budget to project a new version of the
program schedule. But current EVM
instruction is really lacking when it comes
to how to deal with the extra funds you
receive if you're unlucky enough to need
them and lucky enough to get them.
It turns out, as I discovered during the
Javelin recalculations, that once develop-
ment programs get underway, their sta s
of various engineers burn resources at
a fairly consistent rate. For us, we were
involved with knowledge work at that
point; no missiles had yet own. But
lots of chemical, mechanical, electrical
and software engineering was in ow, as
well as all the work of the business types:
admin, scheduling, management and
indirect costs, for example.
LESSON WELL LEARNED
Frequently, we work EVM problems here
at the Naval Postgraduate School. I ask
my students how much more money and
time will be required for a program run-
ning behind schedule and over budget.
Unlike common stock shares' technical
analysis charts, EVM is indeed a predic-
tive tool. And as with an artillery shell just
one millimeter o its de ection or azi-
muth, a cost or schedule variance vectors
out over distance to become quite large
depending on range (or time remaining).
Most often, students come up with a nice
combined index formula for a pessimistic
estimate---maybe the more pessimistic,
the better---but then they expect to spend
many more millions of dollars in only a
few months added to EMD. It just isn't
likely to happen, because practically,
industry cannot simply add sta to "crash"
the program and nish it rapidly. ey'll
most likely continue at their current
systemic rate of cost and schedule inef-
ciency. Hopefully, the earned value you
attain during the extension will be the
same or better than what it's been so far---
but we can't expect miracles.
is knowledge would serve me well a
few years later when I took over my own
program. It was amazingly similar to the
I thought, "How could
webeinsomuch
trouble? And how
could the boss know at
this juncture that we
were going to fail to
stay within budget for
the remainder of the
program?"
ASC.ARMY.MIL 241
COMMENTARY